CAP reform: Hopes pinned on ‘luck of the Irish’

The next five months are lining up to be crucial for bringing the European negotiations on the future Common Agriculture Policy to a conclusion. Will it happen? Increasingly there is a quiet confidence among some people close to the talks that the luck of the Irish and their gift for brokering deals will bring the member states and the European Parliament together by the end of June.

Last week’s vote in the European Parliament’s agriculture committee was a critical first step in the CAP policy process. However, all eyes are once again firmly fixed on the main game in town; the EU budget negotiations due to take place at the next European Summit on 6/7 February.

David Cameron, Angela Merkel, Francois Hollande and all the other EU leaders are yet to agree – unanimously – how much money will be available for the EU budget post-2014. The CAP’s share of the total EU budget has fallen considerably over the years, but still equates to about 40%. How much money will be ring-fenced for the CAP is still a huge driver and, for some, a major stumbling block in the EU budget talks.

In recent years, EU leaders have built a reputation for taking critical decisions right to the wire. Are they at the wire yet? Possibly, although a further EU summit is scheduled to take place in mid-March, which may give those member states that feel they have the most to lose from whatever deal is being brokered, enough leverage to say no in February.

Whatever budget deal is ultimately agreed by the EU leaders, it’s worth bearing in mind the European Parliament does have veto power. Whether MEPs will use that veto will depend on the package put before the parliament, but they have never been shy of using the powers they have within the EU. The Irish need a deal on the budget signed, sealed and delivered by both the council and parliament by the end of March if they have any hope of achieving a political deal on the substance of the CAP reform by June.

The timetable aside, last week’s vote in parliament was a significant first step in the official process. The members of the agriculture committee have agreed significant changes to the commission’s original proposals. The NFU described those original commission proposals as “disappointing” and a “missed opportunity” and while we are managing to successfully negotiate away many of the most bureaucratic elements of the package, we are still a very long way from our ideal vision for the future CAP.

Uneven playing field

What is most concerning to us is the potential for an uneven playing field ensuing once the member states and regional governments start to implement the new CAP. Many may legitimately argue we are already starting from an uneven place in terms of the CAP. This may be true in some areas, but I fear the changes being considered could potentially exacerbate the differences, depending on how member state governments react.

Even within the UK, DEFRA and the devolved regions are likely to take significantly different approaches to implementation. The NFU’s number one overriding priority remains that, whatever the outcome of the EU budget and CAP reform negotiations, our members are treated fairly and equitably.

‘Greening’ of direct payment

Greening the direct payment is seen by many as the centrepiece of these negotiations. We see it as a misguided political tactic to defend the European budget for CAP at all costs.

In what we would consider a positive step forward, MEPs voted last week to recognise the environmental efforts of those farmers who are already in an agri-environment scheme and grant them automatic entitlement to the greening payment.

However, in doing so, this has triggered a new debate. Is it right a farmer should get paid twice for doing the same thing in his agri-environment agreement and whatever will be finally agreed as the mandatory greening requirements? No, we don’t believe so.

What is most concerning to the NFU is the potential for an uneven playing field after CAP implementation

Indeed, we believe existing EU law is well established in this area and that any prospect of funding the same activity twice will be ruled out by the commission.

However, we do believe farmers who are going above and beyond the minimum baseline for greening, wherever that finally ends up, should be entitled to continue to receive two payments – one for greening and one to cover the efforts that go beyond greening.

What this means in practice is that once we know what the EU greening rules will finally look like, individual agreements may need amending in order to strip out any potential double-funding.

In this respect, it’s worth bearing in mind the pledge former farm minister Jim Paice made to the industry a year ago with regards to breaking agreements as a result of greening coming into force.

Transferring direct payments

Enough MEPs also supported calls by DEFRA and other environmental NGOs to grant member states the flexibility to move significant amounts of Pillar 1 direct support payment money across to Pillar 2, the rural development/agri-environment payment envelope. The commission’s proposal was bad enough, giving the scope to move 10% of the envelope. MEPs supported 15% and the DEFRA negotiating position is for 20%.

It’s worth bearing in mind these transfers would replace the voluntary modulation that currently runs at 9% in England, but would be on top of the 10% EU compulsory modulation farmers across the EU face now.

The maths are certainly not pretty were DEFRA to make full use of any new powers. Perhaps one positive that MEPs brought to the table with the blessing of the NFU is the obligation national treasuries would have to provide match-funding alongside any monies transferred out of the direct payments envelope.

NFU opposition to giving national governments the power to cut farm payments deeper and faster is long established. Already Dutch and Danish dairy farmers receive payments that are 91% and 71% higher, respectively, than an English dairy farmer. This reform should seek to narrow the gap in support levels compared with our competitors. At the very least, this position must not be made worse. DEFRA ministers will have this power. Whether they chose to ignore it and instead go down the road of cutting farm payments unilaterally in England will be one of the major political decisions ministers will no doubt face in the coming months.